ACIT, New Delhi V. Sh. Rajeev Chaba, New Delhi

ITA 2969/DEL/2013

• Counselvise Citation: 296920114 RSA 2013
• Duration Of Justice: 2 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 26-06-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 13-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: GOPAL NATHANI
• Keywords: Residential status; Salary income; Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH , NEW DELHI) BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI J. S. REDDY, ACCOUNTANT MEMBER I.T.A. NO. 2969/DEL/2013 ASSESSMENT YEAR : 2004-05 ACIT, CIRCLE 42(1), VS. SHRI RAJEEV CHABA, NEW DELHI 204-206, SIDDHARTH CHAMBERS, R-40, HAUZ KHAS, NEW DELHI 110 016 GIR / PAN:AACPC2520M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. K. JAISWAL, SR. DR RESPONDENT BY : SHRI GOPAL NATHANI, CA DATE OF HEARING : 26.06.2015 DATE OF PRONOUNCEMENT : 17/07/2015 ORDER PER J. S. REDDY, AM: THIS APPEAL BY THE REVENUE IS FILED AGAINST THE ORD ER OF LD. CIT(A)- XXX, NEW DELHI DATED 12.02.2013 FOR THE ASSESSMENT YEAR 2004-05 WHEREIN, THE PENALTY LEVIED U/S 271(1)(C) OF THE AC T BY THE A.O. WAS DELETED BY THE FIRST APPELLATE AUTHORITY. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS CURRENTLY EMPLOYED WITH GENERAL MOTORS INDIA PVT. LTD., HE WAS TRANSFE RRED TO GENERAL MOTORS, JAPAN AS DIRECTOR (MARKETING) IN YEAR 2002. HE CAME BACK INDIA AND WAS APPOINTED AS CHIEF OPERATING OFFICER OF GENERAL MOT ORS INDIA W.E.F. 1 ST SEPTEMBER, 2003. THE ASSESSEE RECEIVED SALARY FRO M GENERAL MOTORS, JAPAN IN JAPANESE YEN FOR THE PERIOD APRIL 2003 TO AUGUST 2003 IN JAPAN DURING ITA NO.2969/DEL/2013 2 HIS STAY TILL AUGUST 2003 BEFORE GETTING SHIFTED TO INDIA. THE ASSESSEE FILED ITS INCOME TAX RETURN DECLARING INCOME OF RS.34,58, 383/- AS PER FORM 16 ISSUED BY GENERAL MOTORS INDIA PVT. LTD, FOR SALARY INCOME EARNED IN INDIA FOR THE PERIOD, FROM SEPTEMBER 2003 TO MARCH, 2004 (A.Y.2004-05). DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAS NOT SHOWN INCOME RECEIVED FROM JAPAN F OR THE PERIOD FROM APRIL 2003 TO AUGUST 2003 AMOUNTING TO RS.23,98,514 /- AFTER DEDUCTION OF TAX @ 32%. THE ABOVE INCOME HAS NOT BEEN SHOWN IN T HE COMPUTATION OF INCOME OFFERED FOR TAXATION IN INDIA. THE INCOME, RECEIVED IN JAPAN IS ADDED TO THE INCOME OF THE ASSESSEE AMOUNTING TO RS.35,27 ,226/- (23,98,514 X 100/68). 3. IT WAS SUBMITTED BY THE LD. A.R. OF THE ASSESSEE THAT ASSESSEE RECEIVED INCOME FROM SALARY FROM GENERAL MOTORS, JAPAN FOR T HE PERIOD FROM APRIL, 2003 TO AUGUST 2003 AMOUNTING TO RS.23,98,514/- (NE T JAPANESE YEN 5996285) AFTER DEDUCTION OF TOTAL TAX AS LEVIABLE I N JAPAN WHERE EVERY PERSON HAS TO PAY FOLLOWING TAXES AT THE RATE PRESCRIBED T HE INCOME EARNED IN JAPAN: I) INCOME TAX II) INHABITANT TAX AS PER PROVISIONS OF ARTICLE 23-PROVISO 2(B) OF DTA A BETWEEN INDIA AND JAPAN. WHERE A RESIDENT OF INDIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, SHALL BE TAXABLE ONLY IN JAPAN, INDIA MAY INCLUDE THIS INCOME IN THE TAX BASE BUT SHALL A LLOW AS A DEDUCTION FROM THE INCOME TAX THAT PART OF INCOME-TAX WHICH I S ATTRIBUTABLE, AS THE CASE MAY BE, TO THE INCOME DERIVED FROM JAPAN. 4. A COPY OF BOOKLET ON TAXATION IN JAPAN COMPILE BY KMPG WAS ALSO SUBMITTED TO SUPPORT HIS CONTENTION THAT INCOME TAX IN JAPAN INCLUDES ITA NO.2969/DEL/2013 3 INHABITANT TAX. IT WAS ARGUED BY THE APPELLANT THA T IN VIEW OF THE ABOVE FACTS, THE A.O. SHOULD HAVE GIVEN TOTAL CREDIT OF TAX DEDU CTED BEING 32% (20% INCOME TAX AND 12% INHABITANT TAX) AND NOT 20% AS I NCOME TAX ONLY IGNORING INHABITANT TAX. THE APPELLANT HAS ALSO RE LIED UPON THE JUDGEMENT IN THE CASE OF BRITISH GAS INDIA PVT. LTD. 2006 ITR 46 2 (AAR). 5. THE ASSESSEE IS CLAIMING THAT WHILE BRINGING TO TAX IN INDIA, THE INCOME EARNED BY HIM IN JAPAN, HE SHOULD BE ALLOWED CREDIT FOR BOTH INCOME TAX AND INHABITANT TAX PAID BY HIM IN JAPAN BECAUSE INHABITANT TAX IS A TAX ON INCOME AND HENCE SHOULD BE TREATED AS A PART OF INC OME TAX. THE ISSUE IS, THEREFORE THAT WHETHER INHABITANT TAX IS TO BE ALLO WED CREDIT AS INCOME TAX OR NOT AND FOR DECIDING THIS, WE HAVE TO REFER TO THE DEFINITION OF TAX GIVEN IN THE DTAA BETWEEN INDIA AND JAPAN. IN ARTICLE 2 OF DTAA TAX HAS BEEN DEFINED AS INCOME TAX AND CORPORATION TAX. SINCE TH E TERM INHABITANT TAX IS NOT COVERED IN THE DTAA, WE HAVE TO SEE WHETHER THI S TERM IS DEFINED / COVERED IN THE DOMESTIC TAX LAWS. WE FIND THAT INH ABITANT TAX IS NEITHER DEFINED NOR COVERED UNDER THE INDIAN TAX LAWS AND, THEREFORE, CREDIT CANNOT BE ALLOWED FOR IT. 6. THE A.O. LEVIED PENALTY U/S 271(1)(C) ON THE GRO UND THAT THE A.O. HAS FURNISHED INACCURATE PARTICULARS OF INCOME BUT THE APPELLATE AUTHORITY DELETED THE PENALTY. AGGRIEVED, THE REVENUE IS BEFORE US O N THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN:- 1 DELETING THE PENALTY IMPOSED U/S 271 (1)( C) OF R S.4,58,358/- IGNORING I) THAT THE ASSESSEE HAS FAILED TO REFLECT IN HIS RETU RN INCOME OF RS.35,27,226/- AS RECEIVED IN JAPAN AS PER PROVISIO NS OF THE ACT. ITA NO.2969/DEL/2013 4 II) THAT AS PER PROVISIONS OF ARTICLE 23 OF DTAA B ETWEEN INDIA & JAPAN, TAX CREDIT HAS TO BE GIVEN ON THE INCOME-TAX PAID IN JAPAN. IN ARTICLE-2 OF THE DTAA, TAX HAS BEEN DEFINED AS INCO ME-TAX & CORPORATION-TAX. THE TERM INHABITANT TAX IS NOT COV ERED. FURTHERMORE INHABITANT TAX CANNOT BE CONSTRUED TO BE INCOME- TA X AS PER INDIAN TAX STATUES. HENCE, CLAIM OF TAX CREDIT FOR INHABITANT TAX PAID IN JAPAN IS IN CONTRAVENTION OF INDIA TAX STATUTES. III) THAT MAKING OF INCORRECT CLAIM OF CREDIT OF I NHABITANT TAX WHICH IN TURN REDUCED HIS TAXABLE INCOME TO THAT EXTENT T ANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS ALSO FAILED TO PRODUCE ANY EVIDENCE AS TO THE PAYMENT OF THE SAME DURING THE ASSESSMENT & PENALTY PROCEEDINGS. IV) THAT DURING THE PENALTY PROCEEDINGS, THE ASSES SEE HAS OFFERED AN EXPLANATION WHICH IT HAS FAILED TO SUBSTANTIATE & HAS FAILED TO PROVE THAT SUCH EXPLANATION WAS BONA FIDE & ALL THE FACTS RELATING TO THE SAME & MATERIAL TO THE COMPUTATION OF ITS TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. V) THAT NO APPEAL WAS FILED AGAINST THE QUANTUM ORD ER. 2) THE APPELLANT CRAVES THE RIGHT TO ALTER, AMEND, ADD OR SUBSTITUTE THE GROUND OF APPEAL' 7. WE HAVE HEARD SHRI K. K. JAISWAL, LD. SR. DR ON BEHALF OF REVENUE AND SHRI GOPAL NATHANI, LD. COUNSEL FOR THE ASSESSE E. ON CAREFUL CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CAS E AND ON PERUSAL OF MATERIAL ON RECORD AND THE ORDERS OF AUTHORITIES BE LOW, WE HOLD THAT LD. CIT(A) HAS PROPERLY ADJUDICATED THE MATTER. HIS OR DER IS WELL SPEAKING ORDER AND LOGICAL ONE. WE ARE OF THE CONSIDERED OP INION THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS PLAUSIBLE EXPLANATION INTE RPRETING DOUBLE TAXATION AVOIDANCE AGREEMENT, WHICH IS A COMPLICATED MATTER. THE ASSESSEE ARGUED ITA NO.2969/DEL/2013 5 WITH THE BONA FIDE BELIEF THAT THE INCOME IN QUESTI ON FROM JAPAN CANNOT BE TAXED IN INDIA. THEREFORE, THE EXPLANATION OF THE ASSESSEE THAT HE MADE CLAIM OF CREDIT OF INHABITANT TAX IS BONA FIDE CLAIM. 8. THE HON'BLE S UPREME COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS PVT. LTD. [(2010) 322 ITR 158 (SC)} HAS HELD THAT SIMPLY FOR THE REASON THAT THE ASSESSING O FFICER DID NOT FIND THE CLAIM OF THE ASSESSEE TO BE SUSTAINABLE IN LAW UP TO A CERTAIN EXTENT, IT CANNO T BE A CASE FOR PENALT Y U / S.271(L)(C) OR S O WHEN THE PARTICULARS FURNISHED BY THE ASSESSEE WE RE NOT INACCURATE . 9. UNDER THESE CIRCUMSTANCES, APPLYING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA), WE CONFIRM THE ORDER OF FIRST APPELLATE AUTHORITY. 10. IN VIEW OF ABOVE, APPEAL FILED BY REVENUE IS DI SMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JULY, 2015. SD./- SD./- ( DIVA SINGH) (J. S. REDDY ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 17 TH JULY, 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.2969/DEL/2013 6 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 15/7 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 15/7 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 17/7/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 17/7 SR. PS/PS 7 FILE SENT TO BENCH CLERK 17/7 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER